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The Creation and Capture of Rents: Wages and Innovation in a Panel of U. K. Companies

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  • John Van Reenen

Abstract

This paper examines the impact of technological innovation on wages using a panel of British firms. A head-count measure of major innovations between 1945 and 1983 is combined with share price and accounting information. Innovating firms are found to have higher average wages, but rival innovation tends to depress own wages. This appears consistent with a model where wages are partly determined by a sharing in the rents generated by innovation. In other words, innovation may be a good instrument for proxies for rents such as profitability, quasi rents, or Tobin's (average) Q. Instrumental variable estimates of the elasticity between wages and quasi rents are about 0.29.

Suggested Citation

  • John Van Reenen, 1996. "The Creation and Capture of Rents: Wages and Innovation in a Panel of U. K. Companies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(1), pages 195-226.
    • Handle: RePEc:oup:qjecon:v:111:y:1996:i:1:p:195-226.
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    File URL: http://hdl.handle.net/10.2307/2946662
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    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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